United States: Every Move You Make, I'll Be Watching You Watching Me Watching You

Smart TVs, like other Internet-connected devices, come
with their fair share of privacy and data security risks. This
article explores a few noteworthy recent and high-profile
developments that cast some doubt on the security of smart TVs and
suggests that device manufacturers may not be sharing complete
information about the data collected and used by those
devices.

When we were kids, the notion of a smart TV with which we
could interact was an unimaginable dream. You can't talk to a
TV; that's crazy! But how cool would that be? SO cool. Today
that fantasy is realty. Smart TVs are widely available and
relatively inexpensive. In November 2015, Gartner forecasted that
there will be more than 20 billion appliances, TVs, and other
devices connected to the Internet by 2020.1 Not
surprisingly, smart TVs, like other Internet-connected devices,
come with their fair share of privacy and data security risks.

This article explores a few noteworthy recent and high-profile
developments, including news stories and regulatory enforcement,
that cast some doubt on the security of smart TVs and suggests that
device manufacturers may not be sharing complete information about
the data collected and used by those devices. The article will also
provide some key takeaways for how information security and privacy
professionals can take a proactive role in helping their
organizations that are building and marketing smart devices,
including smart TVs, to build better safeguards, transparency, and
consumer choices into these and all things that make up the
"Internet of Things."

Privacy concerns

What exactly are "Smart TVs"? The United States
Judicial Panel on Multidistrict Litigation defined them in one
recent case as "televisions that have integrated Internet
capability

that supports direct streaming of movies and other
programs from content providers such as Netflix, Hulu, and
Amazon."2

Smart TVs necessarily raise issues related to their enhanced
capacity for the collection, use, and sharing of sensitive consumer
information. There are few laws that directly regulate such data
processing. One notable exception is California's Business and
Professions Code sections 22948.20-22948.25, which took effect
January 1, 2016. It is one of a kind but limited in its
application. The California law prohibits the operation of a voice
recognition feature in an Internet-connected television without
first prominently informing the user of the feature. It also
prohibits the use or sale for advertising purposes of recordings of
spoken words and conversations captured by a connected television
for improving its voice recognition feature.

Although legislation is not there yet, the Federal Trade
Commission's (FTC) recent settlement with smart TV manufacturer
Vizio, Inc. (Vizio),3 opens up a more in-depth
discussion of the many privacy issues raised by smart TVs going
beyond voice recognition data. As part of its recent focus on the
Internet of Things (IoT) and smart devices, on February 6, 2017,
the FTC in conjunction with the Office of the New Jersey Attorney
General announced a settlement with Vizio, including payment of
$1.5 million to the FTC and $1 million to the New Jersey Division
of Consumer Affairs, with $300,000 of that amount suspended, over
claims that Vizio's smart TVs collected information about
consumers' video-viewing behavior and shared that data with
third parties without sufficient notice or consent.

The FTC's allegations (and pending class action litigation
against Vizio involving similar issues) revolved around the
"Smart Interactivity" feature found on Vizio's smart
TVs. According to the FTC, starting in 2014, Vizio pre-installed
its Smart Interactivity feature on new smart TVs and automatically
installed the feature on older models. According to the complaint,
only older models of the devices included a pop-up making consumers
aware that the feature had been installed. The FTC alleged that
Vizio described the feature as enabling "program offers and
suggestions," which could be turned off through the smart TV
settings.

The FTC's complaint went on to allege that the Smart
Interactivity feature did not actually enable program offers or
suggestions, but rather collected "highly-specific,
second-by-second information" about consumers'
video-viewing behaviors, including what content they watched, when
they watched it, and the length of their views. Vizio allegedly
determined what consumers watched by matching pixels from
consumers' television screens with publicly available pixels
from movies, shows, and commercials. Vizio then allegedly shared
this viewing data, along with persistent identifiers it collected
from consumers, with third-party data brokers in order to license
that data to still other third parties for purposes of measuring
audience viewership, determining advertising effectiveness, and
serving targeted advertisements to specific consumers on their
various devices. In its contracts with the data brokers, Vizio
allegedly prohibited the data brokers from re-identifying consumers
by name but allowed the data brokers to append data from their own
internal databases such as sex, age, and income (thereby building a
more robust consumer profile).

The FTC claimed that Vizio's actions violated Section 5 of
the FTC Act4 in three ways. First, the FTC alleged that
Vizio acted unfairly by collecting and sharing sensitive
information (i.e., video viewership information) without
consumers' consent and through a medium consumers would not
expect to be used for tracking. Second, the FTC alleged that Vizio
deceived consumers by failing to adequately disclose that the Smart
Interactivity feature collected and shared consumers' video
viewership information. Finally, the FTC maintained that Vizio
deceived consumers by falsely representing that the Smart
Interactivity feature enabled program offers and suggestions when
it actually collected and shared consumers' video viewership
information.

It is worth noting the nature and status of the similar class
action litigation as well. The television owners have contended
that Vizio violates both the federal Video Privacy Protection Act
("VPPA")5 and Wiretap Act6 by
tracking what consumers watch and selling that information to
third-party data brokers and advertisers, exposing their personally
identifiable information. In March 2017, a federal judge allowed
the claims for violation of the VPPA, invasion of privacy, and
intrusion upon seclusion to survive a motion to dismiss and granted
plaintiffs leave to amend their allegations as to the Wiretap Act.
The judge also allowed claims for fraudulent omission to move
forward based on allegations that Vizio fraudulently hid its data
practices by failing to mention the software it uses to collect
data and how to disable the software or that the data is sold,
despite a "very small font" privacy policy that claims
the company collects anonymous and non-personal
data.7

Privacy takeaways

What are the privacy takeaways for developers of smart TVs and
other connected devices that are part of the Internet of
Things?

Make accurate disclosures and
do not omit material facts. The FTC's primary concern
with respect to Vizio appears to be that the company allegedly
collected and shared video viewership information without
accurately and fully disclosing its practices. Two of the three
counts against Vizio involved deceptive acts or practices.
According to the FTC, the alleged description of the Smart
Interactivity feature was misleading and the pop-up, without
further information, insufficient. Companies should carefully
review the representations they make, including those made outside
of their privacy policies.

Make sure your practices
align with consumer expectations. The FTC
also voiced concern that Vizio's alleged practices of
collecting and sharing video viewership information did not align
with consumer expectations. Per the FTC, when using a television,
consumers do not expect the television manufacturer to figure out
exactly what they are watching and share that data with third
parties for retargeting purposes. Manufacturers should understand
that, even if a practice does not violate a specific statute, it
may carry a "creepiness factor" that could attract
regulatory scrutiny or impact a company's public perception and
bottom line. To the extent companies intend to engage in such
practices, companies should clearly and prominently alert consumers
of their practices.

Get opt-in consent prior to
sharing video viewership information. In
the Vizio settlement, the FTC refers to video viewership
information as sensitive information that requires opt-in consent
and potentially a separate video policy, prior to collection and
sharing. Interestingly, acting Chairman Maureen Ohlhausen issued a
concurring statement to the settlement questioning whether video
viewership information should be treated as sensitive information.
While there may be some disagreement over the sensitivity of video
viewership information, legislators have taken the position that
such data warrants greater scrutiny than many other forms of data
(as evidenced by the federal VPPA and similar state laws). Under
the VPPA, companies are prohibited from knowingly disclosing
"personally identifiable information" concerning a
consumer to any person unless an exception applies. There is
currently a circuit split as to what constitutes personally
identifiable information under the VPPA with some courts finding
that video viewership information in conjunction with a static
identifier (e.g., an IP address) is sufficient to plead a case. The
VPPA and similar state laws provide consumers with a private right
of action with an accompanying right to statutory damages even in
the absence of a showing of harm.

Be creative with respect to
your disclosures. As part of settlement, the FTC required
Vizio to prominently disclose its practices. The FTC emphasized
that Vizio must provide unavoidable visual disclosures, and, more
relevant for the IoT space, audible disclosures delivered in
"a volume, speed, and cadence sufficient for ordinary
consumers to easily hear and understand." Companies should
view the audible disclosure requirement as a signal that the FTC
expects IoT devices to provide conspicuous disclosures in a manner
that is more aggressive than traditional small-print privacy
policies linked to the bottom of web pages.

The $2.2 million payment does
not tell the whole story. Vizio allegedly collected video
viewership information from more than 10 million televisions prior
to entering into the settlement. So companies might think that the
risk of a $2.2 million settlement seems minuscule in comparison to
the potential upside. However, the settlement also requires Vizio
to destroy all video viewing information collected without opt-in
consent prior to March 1, 2016, establish a mandatory privacy
program, have an independent third party routinely assess its data
practices, keep extensive records and report to the FTC, and create
new policies among other things. Thus, the real cost is
significantly higher than $2.2 million.

Dealing with data brokers
attracts scrutiny. The FTC has shown consistent interest
in regulating data brokers. For example, the FTC issued the report
"Data Brokers: A Call for Transparency and
Accountability" in May 2014 and the report "Big Data: A
Tool for Inclusion or Exclusion" in January 2016. In the
settlement with Vizio, the FTC specifically cited Vizio's
contract prohibiting data brokers from re-identifying consumers yet
allowing them to append certain forms of data. Smart device
manufacturers should therefore be extra careful with regard to
their practices when dealing with data brokers.

Data security issues

The hackability of connected devices, and smart TVs in
particular, has been the subject of discussion for several years.
There is something very intimate about the relationship between
consumers and their televisions that makes this security
vulnerability particularly compelling to the media and consumer
advocates. And yet, it does not appear that much has changed with
respect to the security (or lack thereof) in smart TVs since their
emergence several years ago.

In December 2012, Ars Technica published a piece
entitled "How an Internet-connected Samsung TV can spill your
deepest secrets."8 The story discussed the findings
of a researcher who claimed at the time he had uncovered a
vulnerability in most Samsung models that made it easy for him to
locate their IP address on the Internet. Armed with this
information, he claimed he could remotely access the device and
exercise the same control someone in the same room would have,
including gaining root access and installing malicious
software.

"At this point the attacker has complete control over the
device," he wrote in an email to Ars Technica.
"So we are talking about applying custom firmwares, spying on
the victim if camera and microphone are available, stealing any
credential and account stored...on the device, using his own
certificates when accessing HTTPS websites, and tracking any
activity of the victim (movies, photos, music, and websites seen)
and so on. You become the TV."9

More than four years later, Wikileaks released a cache of
documents in March 2017 purporting to show that the Central
Intelligence Agency (CIA) hacked into smart TVs (and other smart
devices) and that "[d]evelopers used vulnerabilities in
Samsung TVs to ensure the products would capture conversations even
when they appeared to be switched off...The CIA's engineering
development group had a 'to do' list for the smart TV that
included the ability to record video and break into its browser and
apps."10 There are even reports of smart TVs being
hijacked by ransomware.11

Attacks on connected devices have consequences for the larger
Internet as a whole. In October 2016, it was discovered that a
major distributed denial of service (DDoS) attack was caused by a
botnet largely made up of connected IoT devices.12

The law is not well equipped to incentivize device manufacturers
to build in more robust security controls or design with privacy in
mind. Existing state and federal data breach notification laws
generally cover only certain narrow categories of information such
as name with Social Security number, driver's license number,
payment card information, health or medical information, but a few
state laws have been expanded to require notification when
usernames and/or email addresses together with passwords and/or
security questions and answers are exfiltrated. However, a security
breach involving a smart TV is more likely to involve information
about a user's viewing habits or movements as opposed to these
more traditional categories of personally identifying
information.

It seems somewhat more likely that continued enforcement from
the FTC and European regulators, and private class action
litigation, will serve as an instigator. The $2.2 million fine,
order to delete previously collected data, and years of oversight
imposed on Vizio is not nothing, not to mention what must be
extraordinary legal fees to negotiate with the FTC and defend
dozens of class actions that are now before the United States
Judicial Panel on Multidistrict Litigation in the Central District
of California. Further, when the EU General Data Protection
Regulation takes effect in May 2018, even US companies that process
personal data (broadly defined to include device identifiers for
smart TVs and similar devices) of EU data subjects will be forced
to comply with more significant privacy and data security
obligations or face penalties of up to four percent of global
turnover or €20 million.

But we all know that the law is ultimately incapable of keeping
up with technology, which will continue to advance at breakneck
speed. Industry self-regulatory efforts in the smart device world
are likely to be a much more effective and practical solution to
meet the concerns of regulators and consumers alike and to take
steps, if only modest, to beat back bad actors who would seek to
hack into the majority of American living rooms and bedrooms. There
is already such industry action in a number of IoT sectors,
including connected cars. In 2014, the Alliance of Automobile
Manufacturers and the Association of Global Automakers proposed a
set of privacy principles for vehicle technologies and
services.13 It does not appear that the Consumer
Technology Association has yet taken similar steps vis-à-vis
smart TVs or other connected home devices.

Information security professionals can play a critical role by
bringing these issues to the attention of other relevant
stakeholders within the organization, particularly those involved
in design and marketing, legal, and compliance. Information
security professionals are ideally situated to help develop
products with better security in mind, right from the start. They
should have a seat at the table during the product development
stage.

Conclusion

Smart TVs and other connected home devices are here to stay. As
with so many other technology verticals, it would behoove the
consumer electronics industry, policy makers, and consumer
advocates alike to work together to put forth a set of appropriate,
risk-based, self-regulatory principles to help ensure that privacy
interests are protected and information security advanced without
stifling innovation.

This alert provides general coverage of its subject area. We
provide it with the understanding that Frankfurt Kurnit Klein &
Selz is not engaged herein in rendering legal advice, and shall not
be liable for any damages resulting from any error, inaccuracy, or
omission. Our attorneys practice law only in jurisdictions in which
they are properly authorized to do so. We do not seek to represent
clients in other jurisdictions.

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